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Released October 28, 2015 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Major U.S. coal producers reported Tuesday continued efforts to pull in costs in a market that executives termed "unprecedented" and "brutal." Peabody Energy (NYSE:BTU) (Saint Louis, Missouri), Alliance Resource Partners, LP (NASDAQ:ARLP) (Tulsa, Oklahoma) and CONSOL Energy (NYSE:CNX) (Pittsburgh, Pennsylvania) each reported their financial results for the 2015 quarter ended September 30. Industrial Info is tracking a combined 19 active projects by the three companies, with a total investment value of $824.25 million.
Peabody Energy
The self-proclaimed world's largest private-sector coal company reported a third-quarter net loss of $304.7 million, more than double the $150.6 million loss it reported the same quarter a year earlier. Revenue for the quarter totaled $1.42 billion, down nearly 18% from $1.72 billion in third-quarter 2014.
Peabody is expected to complete its underground thermal coal mine expansion and north mine addition in Coulterville, Illinois, in the first quarter of 2016. Construction on the $175 million project begin in 2013. The project includes expansion of the 3.2 million-ton-per-year thermal room and pillar coal mine in multiple phases. The Gateway North addition will replace the original Gateway mine, which is approaching exhaustion. Gateway North will produce 3 million to 4 million tons per year. For additional project information, see Industrial Info's project report.
Industrial Info is tracking 12 Peabody projects worth $299.25 million. Nine of the projects, valued at $192 million, are in the construction phases, while three projects, valued at $107 million, are in the planning phase, where plenty of factors could still alter their timing or ultimate outcome.
The company expects 2015 capital spending, as well as selling and administrative expenses, to be about 25% lower than 2014 levels. Peabody is now setting its 2015 capital expenditure guidance at $140 million to $150 million, compared with its prior 2015 guidance of $160 million to $170 million.
Chief Executive Officer Glenn Kellow said the metallurgical and thermal coal producer delivered a "solid" quarter, despite the "pricing impacts from unprecedented market conditions." During the quarter, Peabody cut operating and administrative costs by $200 million, said Chief Financial Officer Amy Schwetz during the company's earnings conference call.
The company's U.S. Mining segment reported earnings before interest, taxes, depreciation and amortization (EBITDA) fell $44.3 million to $238 million as a result of a volume reduction of 2.5 million tones, which was driven by lower natural gas prices and a longwall move in Colorado.
Peabody's Australia Mining segment EBITDA, however, increased $24.6 million to $34 million, as $150 million in cost improvements overcame $110 million in lower pricing.
Kellow said during the conference call there has been a 70% decline in capital investment from the top coal producers since 2012: "We believe this limited capital investment is insufficient to maintain current production, and coal prices will need to rise well above the levels we see today to incentivize new investments."
In U.S. markets, utility coal demand is projected to drop by 100 million tons this year, primarily due to lower natural gas prices. U.S. coal shipments are projected to fall 90 million tons this year, and additional production cutbacks are expected.
The company said it expects 2016 utility coal consumption to be lower than 2015 levels as a result of natural gas prices and expected coal-fired power plant closures, offsetting higher capacity utilization within the remaining coal fleet.
Beyond 2016, however, market conditions are expected to eventually improve, Kellow said, as coal supplies fall and demand increases due to an increase in natural gas prices from growing liquefied natural gas (LNG) exports, onshore demand and pipeline exports to Mexico.
Alliance Resource Partners
The third-largest coal producer in the eastern U.S., Alliance Resource Partners reported net income for the latest quarter fell more than 30% to $83.4 million from $120 million a year earlier. Quarterly results were impacted by a non-cash asset impairment related to the completion of the White Oak Mine acquisition in Illinois and to inventory builds at various operations due to delays in scheduled coal shipments, according to the company. Revenue for the quarter totaled more than $566 million, down slightly from $569 million a year earlier.
Alliance is continuing the permitting process for the grassroot Penn Ridge underground coal mine and prep plant, located near Avella, Pennsylvania. The 5 million-ton-per-year mine and 1,500-ton-per-hour prep plant would come with an estimated price tag of $175 million. Construction kickoff would take place in mid-2016, with completion in second-quarter 2019. For additional information, see Industrial Info's project report.
Industrial Info is tracking three Alliance projects valued $180 million. Only one of them, worth $1 million, is in the construction phase, and the other two are in the planning phase.
"Overall for the U.S. domestic thermal coal outlook, we expect future demand to be stable," said Alliance Chief Executive Officer Joseph Craft III in the company's earnings release. "However, since the market continues to be oversupplied, causing weak commodity prices, we see no near-term catalyst to improve pricing except a supply response by the industry."
Alliance anticipates total 2015 capital expenditures will range from $265 million to $285 million.
Looking forward, Craft said coal miners in the Appalachian and Northern Illinois basins increased production in the latest quarter from the previous quarter "as competitors fight for survival." He said Alliance has reduced production for the foreseeable future and will mitigate the cuts in production and sales by lowering costs and capital expenditures.
CONSOL Energy
Coal and natural gas producer CONSOL Energy Incorporated reported net income of $118.9 million, compared to a net loss of $1.6 million for the year-earlier quarter.
Industrial Info is tracking four CONSOL Energy projects worth $345 million. This includes the $250 million expansion of refuse areas 7 and 8 for the Bailey Underground coal mine, located in Wind Ridge, Pennsylvania. The three-phase project is set for kickoff at the end of this year, with completion in fourth-quarter 2016. For additional information, see Industrial Info's project report.
CONSOL's Coal Division produced 7.3 million tons in third-quarter 2015, down from 7.8 million tons in third-quarter 2014. The average sales price per ton from its Virginia Operations dropped to $51.82 from $70.57, and the average sales price from its Pennsylvania operations dropped to $56.99 per ton compared to $61.35 per ton a year earlier.
Chief Executive Officer Nicholas Deluliis said the company's coal mining segment achieved a good degree of marketing success with multi-year commitments, despite a "brutal coal environment." As a result of that environment, the company has moved its Pennsylvania Operations to a four-day work week as part of its belt-tightening measures.
Going forward, the company said it expects the idling of coal mines across a number of basins. The company expects to sell 30.6 million to 33.4 million tons of coal in 2016 at a reduced price per ton, compared with the expected sale of 28.9 million to 29.9 million tons in 2015. Maintenance-of-production capital expenditures are expected to be $5 per ton, it said.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and ten international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Peabody Energy
The self-proclaimed world's largest private-sector coal company reported a third-quarter net loss of $304.7 million, more than double the $150.6 million loss it reported the same quarter a year earlier. Revenue for the quarter totaled $1.42 billion, down nearly 18% from $1.72 billion in third-quarter 2014.
Peabody is expected to complete its underground thermal coal mine expansion and north mine addition in Coulterville, Illinois, in the first quarter of 2016. Construction on the $175 million project begin in 2013. The project includes expansion of the 3.2 million-ton-per-year thermal room and pillar coal mine in multiple phases. The Gateway North addition will replace the original Gateway mine, which is approaching exhaustion. Gateway North will produce 3 million to 4 million tons per year. For additional project information, see Industrial Info's project report.
Industrial Info is tracking 12 Peabody projects worth $299.25 million. Nine of the projects, valued at $192 million, are in the construction phases, while three projects, valued at $107 million, are in the planning phase, where plenty of factors could still alter their timing or ultimate outcome.
The company expects 2015 capital spending, as well as selling and administrative expenses, to be about 25% lower than 2014 levels. Peabody is now setting its 2015 capital expenditure guidance at $140 million to $150 million, compared with its prior 2015 guidance of $160 million to $170 million.
Chief Executive Officer Glenn Kellow said the metallurgical and thermal coal producer delivered a "solid" quarter, despite the "pricing impacts from unprecedented market conditions." During the quarter, Peabody cut operating and administrative costs by $200 million, said Chief Financial Officer Amy Schwetz during the company's earnings conference call.
The company's U.S. Mining segment reported earnings before interest, taxes, depreciation and amortization (EBITDA) fell $44.3 million to $238 million as a result of a volume reduction of 2.5 million tones, which was driven by lower natural gas prices and a longwall move in Colorado.
Peabody's Australia Mining segment EBITDA, however, increased $24.6 million to $34 million, as $150 million in cost improvements overcame $110 million in lower pricing.
Kellow said during the conference call there has been a 70% decline in capital investment from the top coal producers since 2012: "We believe this limited capital investment is insufficient to maintain current production, and coal prices will need to rise well above the levels we see today to incentivize new investments."
In U.S. markets, utility coal demand is projected to drop by 100 million tons this year, primarily due to lower natural gas prices. U.S. coal shipments are projected to fall 90 million tons this year, and additional production cutbacks are expected.
The company said it expects 2016 utility coal consumption to be lower than 2015 levels as a result of natural gas prices and expected coal-fired power plant closures, offsetting higher capacity utilization within the remaining coal fleet.
Beyond 2016, however, market conditions are expected to eventually improve, Kellow said, as coal supplies fall and demand increases due to an increase in natural gas prices from growing liquefied natural gas (LNG) exports, onshore demand and pipeline exports to Mexico.
Alliance Resource Partners
The third-largest coal producer in the eastern U.S., Alliance Resource Partners reported net income for the latest quarter fell more than 30% to $83.4 million from $120 million a year earlier. Quarterly results were impacted by a non-cash asset impairment related to the completion of the White Oak Mine acquisition in Illinois and to inventory builds at various operations due to delays in scheduled coal shipments, according to the company. Revenue for the quarter totaled more than $566 million, down slightly from $569 million a year earlier.
Alliance is continuing the permitting process for the grassroot Penn Ridge underground coal mine and prep plant, located near Avella, Pennsylvania. The 5 million-ton-per-year mine and 1,500-ton-per-hour prep plant would come with an estimated price tag of $175 million. Construction kickoff would take place in mid-2016, with completion in second-quarter 2019. For additional information, see Industrial Info's project report.
Industrial Info is tracking three Alliance projects valued $180 million. Only one of them, worth $1 million, is in the construction phase, and the other two are in the planning phase.
"Overall for the U.S. domestic thermal coal outlook, we expect future demand to be stable," said Alliance Chief Executive Officer Joseph Craft III in the company's earnings release. "However, since the market continues to be oversupplied, causing weak commodity prices, we see no near-term catalyst to improve pricing except a supply response by the industry."
Alliance anticipates total 2015 capital expenditures will range from $265 million to $285 million.
Looking forward, Craft said coal miners in the Appalachian and Northern Illinois basins increased production in the latest quarter from the previous quarter "as competitors fight for survival." He said Alliance has reduced production for the foreseeable future and will mitigate the cuts in production and sales by lowering costs and capital expenditures.
CONSOL Energy
Coal and natural gas producer CONSOL Energy Incorporated reported net income of $118.9 million, compared to a net loss of $1.6 million for the year-earlier quarter.
Industrial Info is tracking four CONSOL Energy projects worth $345 million. This includes the $250 million expansion of refuse areas 7 and 8 for the Bailey Underground coal mine, located in Wind Ridge, Pennsylvania. The three-phase project is set for kickoff at the end of this year, with completion in fourth-quarter 2016. For additional information, see Industrial Info's project report.
CONSOL's Coal Division produced 7.3 million tons in third-quarter 2015, down from 7.8 million tons in third-quarter 2014. The average sales price per ton from its Virginia Operations dropped to $51.82 from $70.57, and the average sales price from its Pennsylvania operations dropped to $56.99 per ton compared to $61.35 per ton a year earlier.
Chief Executive Officer Nicholas Deluliis said the company's coal mining segment achieved a good degree of marketing success with multi-year commitments, despite a "brutal coal environment." As a result of that environment, the company has moved its Pennsylvania Operations to a four-day work week as part of its belt-tightening measures.
Going forward, the company said it expects the idling of coal mines across a number of basins. The company expects to sell 30.6 million to 33.4 million tons of coal in 2016 at a reduced price per ton, compared with the expected sale of 28.9 million to 29.9 million tons in 2015. Maintenance-of-production capital expenditures are expected to be $5 per ton, it said.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and ten international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
